Everyone knows about the 2006 market crash that has resulted in devistated home values in our local Clark County area. In all of my dealings with sellers I am finding that the big question is "what is going to happen next?". Of course I am not a big time TV prognosticator but I do have a vast amount of real estate experience and I good head of common sense on my shoulders. So if you are up for a quick common sense guide to the next 5 years in Clark County real estate keep reading...
My first common sense observation is that we haven't yet hit the bottom. Of course you may hear otherwise from all kinds of seemingly reputable sources but... common sense tells us a dfferent story. If you are looking to purchase a home in Clark County for under $250k then you are going to run into a very high percentage of homes that are being listed as distressed properties. With such a high percentage of homes still selling as distressed properties the prices keep on coming down.
Another factor that many people may not be aware of is that there is a second wave of distressed properties that will be hitting the market starting in 2010. This wave is actually predicted to be larger than the 2006 wave? Where are all of the new distressed properties going to come from? There are literally millions of dollars in "Option Arm" loans that are scheduled to start resetting in 2010. Option Arm loans are the loans that gave people 3-5 year "teaser" rates that would balloon up to "real" payments when they matured.
The thinking behind these loans was that a home owner could simply refinance them to a new "Option Arm" when the old ones matured... The big problem is that a majority of these owners will not be able to refinance because they don't have the equity, they no longer qualify, and many of the old types of loan programs no longer exist. With payments rising and the option to refinance out of reach, there will be many owners who simply can't make their mortgage.
Now, if we're optimisic and say that this second wave will take only half as long to clear out as the first wave, then we are looking at a declining market until mid 2011.
The second common sense observation that I see is that when the market finally levels off we'll still need to get enough buyers active to push the market back up. The problem that we will be facing here is that many of the buyers that drove up the first market will now be recovering from the credit damage of losing their homes. When someone goes through a short sale they are typically looking at 2-3 years before they will be able to buy again and those who have faced foreclosure will need 5-7 years to qualify for a new home.
Again let's take the optimistic approach and use the lowest number of 2 years. Using this number we won't have enough credit worthy buyers to drive the market back up until the summer of 2014.
My third common sense observation is one that you will be able to identify with very quickly if you live in our local Clark County area. You can drive just about anywhere and you'll see vacant lots with white stakes in the ground... these are ready to build lots that are sitting dormant until builders decide that there are enough buyers to warrant building them out. You guessed it, as soon as the builders see that the market is turning up they will almsot certainly flood the market with new homes and upset the "supply and demand' balance. This will keep prices in check until the supply of new homes starts to thin out, which will most likely take at least a couple of years to achieve.
Now we're out to the summer of 2016 and we're ready for the market to have a real opportunity at recovery. The question that we have to ask now is how fast will prices rise? You can Google the historical appreciation rates in the United States and find that historically home prices rise about 3-5% per year. At that rate it would take a significant amount of time to build up any worthwhile amount of equity and it would be significantly offset by average monetary inflation.
Of course the one common sense thing that I haven't addressed yet is that with the amount of money our government is borrowing and spending, inflation is going to have to happen at some point. With inflation comes higher interest rates and if the rates start moving up the chart that would put a major flat tire on the real estate markets drive to recovery.
Again I am not a big TV prognosticator but these are the common sense steps that Clark County will need to go through in order to see significant gains in property value. Anyone that is waiting to sell their home needs to plan on waiting for several years. Otherwise they will just be riding the market down further, paying interest they won't get back, or wasting valuable years of their lives living in a location that doesn't match their dreams and goals.
Houses are moving in this market. Our team has closed on nearly 300 homes since January of 2007. If your goals and dreams really matter to you than you should sit down with us and put together a plan to get you there.
Posted by Andy Elliott, Team Leader for the Siebold & Combs Team. "Siebold & Combs Sells More Homes"
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